The youngest members of the workforce aren't planning to stay as long as previous generations stayed in the working world.
Gen Zers, defined as Americans between 18 and 25, aim to retire by 59 on average, according to Northwestern Mutual's 2022 Planning and Progress study. Millennials, defined as those between 26 and 41, intend to retire by 61 on average.
On average, American workers think they'll need $1.7 million to retire comfortably, according to Charles Schwab's most recent study, but that varies by generation. Gen Zers and millennials believe they'll need to put away $1.4 million and $1.8 million, respectively.
Although financial planners typically recommend saving between 10% and 15% of your gross annual income for retirement, the average worker with an employer-sponsored retirement plan only contributes about 7% of their income toward their retirement fund according to Vanguard's "How America Saves 2022" survey.
However, a shorter time in the workforce means you'll need to put more money into your retirement savings to meet your financial goals.
With this in mind, CNBC calculated how much members of Gen Z need to put away each month to retire with $2 million by 59, as well as how much they'd need to earn to accomplish this without saving more than 15% of their income. These calculations assume a starting point of $0.
Additionally, these calculations don't account for uncontrollable factors that may impact their ability to save for retirement such as market volatility, pay increases, unexpected life events or periods of unemployment.
How much you need to save each month to retire at 59 with $2 million
If you start at 25
Earning a 4% annual rate of return: $2,301.22 per month
- Annual salary needed if you save 10% of your income: $276,146
- Annual salary needed if you save 15% of your income: $184,107
Earning a 6% annual rate of return: $1,503.39 per month
- Annual salary needed if you save 10% of your income: $180,407
- Annual salary needed if you save 15% of your income: $120,278
Earning a 8% annual rate of return: $949.40 per month
- Annual salary needed if you save 10% of your income: $113,928
- Annual salary needed if you save 15% of your income: $75,956
If you start at 30
Earning a 4% annual rate of return: $3,052.80 per month
- Annual salary needed if you save 10% of your income: $366,336
- Annual salary needed if you save 15% of your income: $244,236
Earning a 6% annual rate of return: $2,140.09 per month
- Annual salary needed if you save 10% of your income: $256,811
- Annual salary needed if you save 15% of your income: $171,216
Earning a 8% annual rate of return: $1,465.58 per month
- Annual salary needed if you save 10% of your income: $175,870
- Annual salary needed if you save 15% of your income: $117,252
If you start at 35
Earning a 4% annual rate of return: $4,147.15 per month
- Annual salary needed if you save 10% of your income: $497,658
- Annual salary needed if you save 15% of your income: $331,788
Earning a 6% annual rate of return: $3,119.56 per month
- Annual salary needed if you save 10% of your income: $374,347
- Annual salary needed if you save 15% of your income: $249,577
Earning a 8% annual rate of return: $2,307.75 per month
- Annual salary needed if you save 10% of your income: $276,930
- Annual salary needed if you save 15% of your income: $184,629
Although the majority of both Gen Zers and millennials are confident in their ability to achieve long-term financial security, nearly 75% of each age demographic admit that their financial planning needs improvement, according to Northwestern Mutual's survey.
Some are already taking steps to improve their money habits.
Almost 30% of Gen Z respondents say they didn't have a financial advisor before 2022, but plan to work with one or have already begun working with one, Northwestern Mutual reports. Nearly 25% of millennials said the same.
Additionally, 70% of Gen Zers say they were able to build up their savings during the Covid-19 pandemic — the highest percentage across all age groups, according to the survey.
"It's encouraging to see the youngest generation of adults showing an inclination to plan and holding themselves to a high bar," Christian Mitchell, executive vice president and chief customer officer at Northwestern Mutual, said in a press release.
"Developing a plan isn't just the first step toward achieving your long-germ goals, it's also what allows you to enjoy your life more along the way."
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